With a 4.5% adjustment in the personal income tax brackets to combat fiscal drag and no increase in the general fuel levy and Road Accident Fund levy, finance minister Enoch Gondongwana’s maiden budget speech delivered good news for consumers.
And positively for the business sector, the proposed lowering of corporate income tax to 27% as indicated in last year’s Budget will take effect from 1 April 2022 as planned.
While sobering metrics were presented regarding the country’s debt burden, it was encouraging to note a much-needed focus on reducing the continual demands for bailouts from SoEs - and that some will be retained, while others will be rationalised or consolidated. We also look forward to the ongoing reform of South Africa’s electricity sector in order to reduce reliance on Eskom and create a reliable energy supply. Clear deadlines were provided for both in the new financial year.
Critical to our economic recovery are the promised structural reforms and infrastructure investment which would ultimately not only benefit the country’s economy in general, but also create space for the private sector in order to boost revenues, employment and importantly, confidence.
From a property market perspective, we are very much aware that confidence and positive sentiment is critical to investment and market activity – both from a local and international point of view.
Despite its clear focus on containing debt levels, the National Budget managed to deliver additional support for the vulnerable, low-income households and SMEs in distress as a result of the pandemic, as well as education, health and the fight against crime and corruption, which is extremely welcome.
However, we would have liked to have seen a further increase in the threshold for transfer duty exemption, which currently stands at homes purchased for below R1m, particularly as the average price paid by first time home buyers, according to Ooba, currently stands at R1.14m (January 2022).
The National Budget is, however, always a balancing act, and what markets in general look for is ongoing commitment to the current fiscal consolidation path while focusing on growth-enhancing reforms and related infrastructure plans, which is what Godongwana’s maiden Budget has attempted to deliver.
We believe that given the above factors, coupled with the prevailing low interest rate environment – despite the moderate upward cycle, will foster favourable market sentiment and help buoy ongoing activity in the residential property market in South Africa, while contributing towards affordability for first-time home buyers eager to gain a foothold in the market.
The residential property market has proven its resilience over many decades, including Covid and the ensuing lockdowns, and we continue to experience strong demand for homes especially in the sub-R3m price band, but also in the price bracket from R3m upwards, with recovery and increased activity also seen in the upper and luxury end of the market.
Noteworthy in the light of loadshedding and the dramatic increase in electricity prices in recent years is that existing and aspirant homeowners are increasingly investing in going off the grid as far as affordably possible – a trend which is gathering momentum and is likely to accelerate exponentially in the future.